Commodity Currencies - Trade forex with currencies that are influenced by Commodities' prices
Commodity Currencies - Trade forex with currencies that are influenced by Commodities' prices
Commodity currency trading is defined as the smaller section of foreign exchange trading that is rather dedicated but can offer a lot of opportunities to the traders who are interested in the prices of certain commodities, especially oil and gold. In the forex markets, 'commodity currencies' are the currencies of countries whose major exports are in the form of raw materials.
As we just mentioned, the single most important are oil and gold, but other raw materials can include metals other than gold, agricultural products, precious stones, etc.
There are so many countries in the world that have raw material exports of course, but many of them have minor currencies that most traders would not wish to become involved with. Basically there are just three main commodity currencies: the Canadian dollar CAD, the Australian dollar AUD and the New Zealand dollar NZD. All of these have enough liquidity to make them interesting for forex traders.
You might be expecting that, commodity currency values are often closely linked to commodity prices. But in some countries like Canada, which is known as the world's second largest exporter of oil, changes in the price of oil will have an effect on the value of the Canadian dollar. New Zealand has a wider basket of commodity exports .In Australia; the significant commodity export is gold.
In easy words the currencies of countries that depend to a great extent on the export of commodities are often referred to as 'commodity currencies.' Both the value of the commodity and the country's trade balance, with respect to the commodity, are noteworthy factors in the valuation of commodity currencies. An important feature that any Forex trader should regard as is that the value of commodity currencies usually rise and fall with the value of the country's main product exports.
The three main countries which make use of the commodity currencies are those of Canada, New Zealand and Australia. The common point between all the three is the "dollar," therefore these commodity currencies are often termed as 'comdolls.'While there are lots of countries who export commodities as well, the exports of these three countries make up a larger share of their annual Gross Domestic Product.
Australia
Very few of us know that Australia is the second biggest producer of gold in the world, just behind South Africa. Gold exports accounts for a big percentage of the nation's GDP, so any changes in gold prices will surely impact on the country's GDP and the value of its currency. And, if manufacturing of gold is shown to decline it could also signal a potential declining of the Aussie Dollar. Export of petroleum goods has been rising at a quicker rate in Australia than any other export, currently netting the country over $13 billion a year. While People know Australia for the Forex traders and for its gold exports, oil is also a significant export commodity.
New Zealand
In the case of New Zealand it is not known by any single product it means that the exports are not dominated by any one commodity, but the main prominent ones include timber, dairy products and meat products. Various commodity indices have been shown to be valuable long-standing indicators of the New Zealand Dollar's value.
Canada
It has been observed over the last few years that in Canada export of petroleum products have averaged over $60 billion a year. Another point to notice is that commodity export for Canada is aluminum, which adds another $8 billion in revenue every year. Canada is a major exporter of oil. Most countries in the world import more oil than is exported, Canada is one of the only developed nations to have a net export of oil Canada has also experienced dramatic growth in export of other precious metals including zinc, copper and nickel - each showing year-over-year increases of over 50%.
Some may be wondering whether which commodity to get in. But with food and crude prices reaching newer heights, the current market sure may not look striking to an outsider, but ask the futures traders who find it a tough task to make money when the conditions doesn't favor them. So, if you invest in crude, oil, and gas you can make profit from the growing prices that are expected to further rise as the search for newer oil sources gets impetus. So also, if you are investing in agriculture stocks, it will help you make money as the price of food prices rise.
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Commodity Currencies - Trade forex with currencies that are influenced by Commodities' prices